In the midst of a summer slump for the cannabis industry, one financial expert says opportunities for investors are continuing to spring up in the US as the possibility of the full legalization of cannabis approaches.

Elliot Johnson, chief operating officer at Evolve Funds Group, told the Investing News Network (INN) that, despite the struggle for public cannabis companies seen since the end of Q1 2019, the industry is beginning to find its footing as players in the space establish themselves in markets across the US.


“If you look at the North American Marijuana Index, last year it had three draw downs that were roughly around 40 percent in depth, and in each case it came back to new highs,” Johnson told INN.

 

Cannabis - Will The Fortune 500 Join The Party?

 
Our Exclusive FREE Report Contains Information You NEED To Know About Cannabis Stock Investing!
 

The investing executive said so far this year there’s only been one similar drop after the end of March.

This summer has been full of volatility for the cannabis stock market, as a variety of scandals and changes have affected the confidence of investors, at least in the short term.

Such scandals include the case of CannTrust Holdings’ (NYSE:CTST,TSX:TRST) illegal growing scheme, a stern warning for multi-state operator (MSO) Curaleaf Holdings (CSE:CURA,OTCQX:CURLF) for its hemp-derived cannabidiol (CBD) products from the US Food and Drug Administration and the firing of former Canopy Growth (NYSE:CGC,TSX:WEED) CEO Bruce Linton.

In Johnson’s estimation, however, the general state of the market has been “symptomatic of a general risk-off appetite in equities” rather than a direct reflection on the value of individual companies.

“I think it’s been a good growing up summer for the industry,” he said, mentioning that the issues the cannabis space has seen in recent months have served to reinforce the importance of upholding regulations and maintaining good internal governance practices, while reminding investors to ask questions about management policies.

Johnson reaffirmed his optimism for American cannabis market trading, saying investors should carefully consider their options in the US due to the significant gap in valuations. Canadian companies are trading at about 21 times the valuation of their American counterparts, according to Johnson.

He attributed the discount in price to the “legal limbo” currently playing out in the US.

The passing of the farm bill in 2018 opened the doors to the rush for cannabidiol products thanks to the legalization of hemp and its derivatives. However, despite this advancement, the legal status of the drug is still dealt with largely on a state-by-state basis.

It’s the companies in the US that are focused on product branding and developing brand loyalty, he said, that will offer investors some of the most interesting opportunities.

“If you’re buying an edible or a CBD-infused beauty product, you’re probably not going to be particularly concerned about where the original source material comes from,” said Johnson, adding that companies with strong consumer-facing brands will be the best positioned in the face of federal cannabis legalization.

Another advantage for the current landscape in the US is the ability to market products more freely, unlike in Canada where cannabis products are under strict packaging guidelines, a factor Johnson said has directly impacted Canada’s first-mover advantage.

 

Cannabis - Will The Fortune 500 Join The Party?

 
Our Exclusive FREE Report Contains Information You NEED To Know About Cannabis Stock Investing!
 

“I think the approach that’s being taken here is to treat cannabis the way we treat alcohol, which is not widely advertised and distribution of alcohol is not as widely deregulated,” Johnson told INN.

Though it’s not legal at the federal level, recreational cannabis in the US is legal in 11 states, with the most recent addition to the list being Illinois, as the midwestern state will open its program in January 2020. Medical marijuana is legal across 33 states.

Johnson said Evolve often uses California as an example of the size and dominance of the American cannabis market.

When it comes to stocks, the financial expert, who also manages both cannabis exchange-traded funds (ETFs) for Evolve, said the real hitmakers in the country are MSOs. He called them “the safest bet” for investors looking to get a piece of the market.

Johnson praised MSO firms like Curaleaf Holdings and Harvest Health & Recreation (CSE:HARV,OTCQX:HRVSF) as prime examples of efficient execution across several different legal frameworks.

“They have been able to effectively do a startup 10 times over,” he said.

The prominence of MSOs in the cannabis stock universe led Evolve to launch their second marijuana ETF, the Evolve US Marijuana ETF (NEO:USMJ), to better capture the US play.

USMJ features cannabis giants like Canopy and Charlotte’s Web Holdings (TSX:CWEB,OTCQX:CWBHF) among its largest holdings. However, the fund also has a large focus on American players and features Curaleaf Holdings and Cresco Labs (CSE:CL,OTCQX:CRLBF).

Currently, a little over half of USMJ’s holdings are companies based in the US.

Johnson estimates it will only be a matter of time until the US joins Canada with full sweeping legalization, after which he said investors would see a “significant repricing” of American cannabis companies.

Don’t forget to follow us @INN_Cannabis for real-time news updates!

Securities Disclosure: I, Danielle Edwards, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

 

Cannabis - Will The Fortune 500 Join The Party?

 
Our Exclusive FREE Report Contains Information You NEED To Know About Cannabis Stock Investing!
 

Lobe invites individual and institutional investors as well as advisors and analysts to attend its real-time, interactive presentation at the Emerging Growth Conference

 Lobe Sciences Ltd. (CSE: LOBE) (OTC Pink: GTSIF) (“Lobe” or the “Company”) is pleased to announce that it has been invited to present at the Emerging Growth Conference on April 14, 2021.

Keep reading... Show less

Company is strategically building a diverse edibles portfolio with taste-forward and effects-driven products to cater to market and consumer needs

Cresco Labs (CSE:CL) (OTCQX:CRLBF) (“Cresco Labs” or “the Company”), a vertically integrated multistate operator and the number one U.S. wholesaler of branded cannabis products, today announced the launch of Wonder Wellness (“Wonder”) Gummies and availability in Illinois. The new low-dose edibles are enhanced with botanicals to complement the overall cannabis experience, and their simple packaging communicates desired effects so wellness-minded category newcomers can consume with confidence to add cannabis as a part of their daily lifestyles.

Keep reading... Show less

INDVR Brands Inc. (CSE: IDVR) (the “Company” or “INDVR Brands” or “INDVR”), a premier cannabis brand, consolidator and edibles retailer, proudly announces it has signed a Letter of Intent (“LOI”) with BevCanna Enterprises Inc. (“BevCanna”) to produce and distribute certain HONU THC infused and award-winning edible products to retail locations across Canada. The new partnership marks INDVR’s first introduction to the Canadian cannabis market and its first international expansion.

With the THC infused product segment making up a growing percentage of the cannabis consumed in Canada, now is the ideal time to introduce our HONU brand into an edibles market estimated at approximately $1.6 billion annually,” said Joshua Mann, INDVR’s CEO. “Our dedication to product quality and consistency is our defining factor in producing some of the most trusted products in Washington and Oregon states, and we are excited to start building the same brand-loyal following across Canada.”

Keep reading... Show less

Reports Eighth Consecutive Quarter of Positive Adjusted EBITDA and Positive Adjusted EBITDA from Cannabis Business

 Aphria Inc. (” Aphria ,” ” we ,” or the ” Company “) (TSX: APHA) (NASDAQ: APHA), a leading global cannabis-lifestyle consumer packaged goods company inspiring and empowering the worldwide community to live their very best life, today reported its financial results for the third quarter and nine months ended February 28, 2021 . All amounts are expressed in Canadian dollars, unless otherwise noted and except for per gram, kilogram, kilogram equivalents, and per share amounts.

Keep reading... Show less

Hill Street Beverage Company Inc. (TSXV: BEER) (“Hill Street” or the “Company”) is pleased to announce that it has closed its previously announced non-brokered private placement of units (“Units”), at a price of $0.08 per Unit, for aggregate gross proceeds to the Company of $3,403,883.52, which was oversubscribed by almost $1,000,000. Each Unit is comprised of one (1) common share and one (1) warrant (“Warrant”), with each Warrant entitling the holder thereof to purchase one (1) common share of the Company at a price of $0.11 per share for a period of three (3) years from Closing (“Offering”). All the securities issued in connection with the offering will be subject to a hold period of four-months and one day from the date of closing.

“We are extremely pleased with the response to our offering and the quality of investors from both Canada and the US, that are supporting our global growth agenda,” said Lori Senecal. “This capital is important for our next phase of corporate development as we continue to build out our programs to monetize the patent usage rights we acquired to DehydraTECH (R) fast-acting emulsion technology,” added Craig Binkley.

Keep reading... Show less